January 27, 1995|by MARGIE PETERSON And JOHN P. MARTIN, The Morning Call

It was music to the ears of Kutztown University students and their parents. On Wednesday, President Clinton came bearing gifts, including a plan to allow Americans to deduct the cost of higher education from their taxes and use tax-free Individual Retirement Accounts for tuition.

But the bone Clinton threw to a beleaguered middle class raised more questions than it answered, education officials said.

How much will it cost and how will it be paid?

Does it have a prayer of becoming law in the face of a Republican-controlled Congress?

The U.S. Treasury Department estimates that over five years the tax deduction for tuition would cost the government $20.6 billion and the IRA proposal, $3.7 billion. But until the president's budget is unveiled next month, the administration is keeping mum on how the costs would be paid.

David Longanecker, assistant secretary of post-secondary education for the U.S. Department of Education, would only promise it will not come out of needs-based tuition assistance like Pell grants. The budget proposal that Clinton plans to release next month will have an increase in total funds for education, he said.

Under the plan, single wage earners with incomes up to $100,000 and married couples making as much as $120,000 could deduct up to $10,000 a year for their education expenses or their children's.

The program -- which would be phased in over five years -- is expected to ease the tuition burden for most of the 16 million Americans enrolled in higher education and enable another 500,000 to go to college, Longanecker said.

Such help for families is sorely needed, educators say.

"Federal aid is targeted toward low- and moderate-income people," said David Merkowitz, spokesman for the American Council on Education in Washington, D.C. "It's people in the middle (class) who have been squeezed most in recent years."

Between 1983 and 1993, tuition, room and board costs rose 113 percent at private colleges and 83 percent at public colleges, according to the U.S. Department of Education.

Federal tuition assistance such as Pell Grants have not kept pace with inflation. And tax reform in the late '80s removed the exemptions students had long enjoyed on scholarships, grants and loans.

But some in higher education are wary of what cuts will be made to pay for the tax deductions.

"I don't think that we have been told, quite frankly, what would be sacrificed," said Barry McCarty, the financial aid director at Lafayette College, where about 60 percent of the students receive some aid.

Clinton also proposed collapsing 70 federal job-training programs into one program that would give displaced workers and low-wage earners vouchers of up to $2,600 a year for two years to pay for the training they choose.

The voucher proposal, while lacking the most details, is probably most geared toward community colleges and trade schools. Tuition at Pennsylvania's 14 community colleges averaged $53 per credit last year, with full-time students facing an average bill of $1,272 for two semesters with a minimum 12-credit load.

But the voucher also could be used by students at private schools like Allentown College of St. Francis de Sales, where tuition is about $9,600 and nearly 90 percent of the students accept some form of financial aid, according to financial aid director Cate McIntyre.

And the other proposals would go a long way at Allentown College, where most of the students hail from middle-class families and are likely to be the first generation to attend college, she said.

"Our families are trying to make it," McIntyre said.

But those families shouldn't count their tax deductions yet. Clinton's proposals still have to pass a Republican-controlled Congress.

Moravian College President Roger Martin, a member of the tax committee on National Association of Independent Colleges and Universities (NAICU), is skeptical the president can win congressional approval.

"I wouldn't be surprised if he runs into trouble," he said. Martin hoped to get some answers next week, when House Speaker Newt Gingrich delivers the keynote address to at a NAICU conference in Washington.

The federal government accounted for $32.5 billion in student financial aid last year. And with Republicans clamoring for a balanced budget, McCarty worries that they might turn the budget knife on education subsidies, which could more than offset any tax credit package.

Indeed, colleges may be grateful to hold on to the status quo. The American Council on Education's Merkowitz said the "fine print" in the Republican Contract with America includes possible budget cuts eliminating three campus-based aid programs and the exemption on interest on student loans.

Currently, students don't pay interest on college loans while they are in school.